CANADIAN SECURITY TRADERS ASSOCIATION, INC · The Canadian Security Traders Association, Inc. ......

CANADIAN SECURITY TRADERS ASSOCIATION, INC.

P.O. Box 3, 31 Adelaide Street East Toronto, Ontario M5C 2H8

January 14, 2011 John Stevenson, Secretary Ontario Securities Commission 20 Queen Street West Suite 1900, Box 55 Toronto, Ontario M5H 3S8 E‐mail: [email protected] And Me Anne‐Marie Beaudoin Corporate Secretary Autorité des marchés financiers 800, square Victoria, 22e étage C.P. 246, tour de la Bourse Montréal (Québec) H4Z 1G3 e‐mail:consultation‐en‐[email protected] And James Twiss – Vice President, Market Regulation Policy Kevin McCoy – Senior Policy Analyst, Market Regulation Policy Investment Industry Regulatory Organization of Canada Suite 1600 121 King Street West Toronto, Ontario M5H 3T9 Email: [email protected]/[email protected] Dear Sirs/Madam; The Canadian Security Traders Association, Inc. (CSTA), is a professional trade organization that works to improve the ethics, business standards and working environment for members who are engaged in the buying, selling and trading of securities (mainly equities). The CSTA represents over 900 members nationwide, and is led by Governors from each of three distinct regions (Toronto, Montreal and Vancouver.) The organization was founded in 2000 to serve as a national voice for our affiliate organizations. The CSTA is also affiliated with the Security Traders Association (STA) in

mailto:[email protected]/[email protected]

the United States of America, which has 5,200 members globally, making it the largest organization of its kind in the world. The intent of this letter is to respond to the Joint Canadian Securities Administrators/IIROC “Position Paper 23‐405: Dark Liquidity in the Canadian Market”. Respondent Metrics The CSTA extended a survey to its constituency and received 139 completed responses from Traders; of those responses, 36 were Buy Side Traders and 103 were Sell Side Traders. In total 144 Traders participated in the survey (139 completed surveys). The split was between 40 Buy Side Traders (36 completed) and 111 Sell Side traders (103 completed surveys). There were also 18 members from Exchanges, 6 Vendors and 11 members indicated as “Other” (such as Consultants, Sell Side Sales persons, and Algo/DMA participants). Though the respondents’ geographic breakdown was predominantly from Toronto (and thus members of IETA), we also received 15 responses from Montreal (MIETA) and 13 responses from Vancouver (VSTA). Of the dealer members that responded, we were close to a 50/50 split between the Bank‐Owned Dealers and Non‐Bank Owned Dealers. Overall, we were hoping for a larger sample size of respondents, but our survey was released over the December holiday and many members were unavailable for comment. Despite this fact, we believe that the survey has a large enough sample size to loosely represent the overall distribution of views within the CSTA membership. Survey Construction The survey was constructed with 15 questions. Some questions were dependent on the answers given in previous questions and as such were treated as a pair. In the event that we were not able to provide the full range of possibilities in response to a question, a free form field was available to allow for those possibilities to be discussed. We have attached the results summarizing traders’ views on issues pertaining to the Position Paper. The results have been segregated by whether the respondent was a Buy Side Trader or a Sell Side Trader. There are two attachments to this letter: the first is a summary of the multiple choice responses and the second includes the free‐form responses to the open‐ended questions in the survey. Analysis of Survey Results We felt that the best approach to summarizing the survey results was to pool the questions into 3 categories – questions where consensus was reached across all respondent classifications, questions where consensus was reached within particular respondent classifications but differed

from other respondent types creating a distinct “divergence” of opinion and finally questions where there was no consensus inter or intra group. Consensus Across all Respondent Groups Question #7: Should visible orders have priority over Dark Orders at the same price?

The vast majority of Buy Side and Sell Side Traders believed that in general, Visible Orders should have priority over Dark Orders at the same price. A large subset of those also believed that this should hold true across ALL marketplaces. Although we acknowledge that Visible over Dark priority across ALL marketplaces would probably not be a viable logistical solution, the answer provided clearly expresses the vigor of overall opinion.

Question #8: Should two “Large” Dark Orders that match be exempt from any meaningful price improvement rule? (ie. Broker crosses are currently allowed to cross at the NBBO).

The majority of Buy Side and Sell Side Traders believed that “Large” Dark Order types should be exempt from the meaningful price improvement rule.

Question #12: Should Partially Hidden Orders be required to meet a minimum size limit? (ie. Iceberg orders).

The majority of Buy Side and Sell Side Traders believed that Partially Hidden Orders did NOT need to meet a minimum size requirement.

Question #14: Should the MOC (Market On Close) facility be exempted from any minimum size requirements (since the MOC facility is a Dark Order Facility by definition)?

The majority of Buy Side and Sell Side Traders believed that the MOC facility should be exempt from minimum size requirements.

Divergence in Consensus Between Respondent Groups Question #5: Should Dark Orders be required to provide “meaningful” price improvement over the NBBO?

For this question, the answers are difficult to analyze. The Buy Side was split 50% vs 47% between “Yes” / “Yes” with exceptions” and “No” / “No with Exceptions”. The Sell Side however had a 65% majority for “Yes” / “Yes” with exceptions”. We find this response curious as trading at the touch would allow for dealers to internalize flow at better economics. This being said, we recognize that the answers provided are those of traders themselves and reflect not only the economics, but also the operational and overall opinion of the direction of market structure in Canada.

Question #15: The CSA/IIROC has stated the following in their Position Paper 23‐405 (pg. 2): “We are of the view that, in order to facilitate the price discovery process, orders entered on a marketplace should generally be transparent to the public and subject to the pre‐trade information transparency requirements as detailed in NI 21‐101”. Do you agree with this statement?

73% of Sell Side Traders answered Yes/Yes with exceptions, while Buy Side Traders were split 50% vs. 42% between “Yes” / “Yes” with exceptions” and “No” / “No with Exceptions”. There were a number of free form entries to qualify the multiple choice answers to this section. While we’d hoped that the survey would represent Traders’ personal views on the discussed issues, there were 7 identical responses that could indicate that alternatively, firm views were being expressed. To ensure integrity of the survey, we allow only one answer from a particular IP address, thus the identical answers provided were from different input destinations.

Generally No Consensus Intra– or Inter– Group An interesting observation Question #6: If “YES” to meaningful price improvement (Q #5), what do you consider to be “meaningful” price improvement? Question #9: If “YES” to allowing “Large” Dark Orders to cross on the NBBO in Q #8, what do you believe should be considered the size of a “Large” Order? (Share amount or $ amount). Question #11: If “YES” to minimum size limits for Dark Orders, what should the minimum size be? Question #13: If “YES” to Partially Hidden Orders requiring minimum size limits, what should the minimum size limit be?

The four questions listed above polled the street for quantitative answers regarding size, for those that felt there should be an absolute quantitative limit on price improvement or Dark Order Type sizes. The responses to defining “meaningful” price improvement and thresholds for “minimum” Orders sizes were widely distributed between the choices provided and the free‐ form text answers. Though the answers provided to us by CSTA members did not refute the quantitative suggestions provided in the Position Paper, we feel that a more in depth analysis needs to be done by CSA/IIROC in the determination of size and price bands.

The lone ranger Question #10: Should Dark Orders be required to meet a minimum size limit? (ie. Any order directed to a Dark Pool or any Fully Hidden Order Type offered by an Exchange/ATS).

Outside of defining quantitative metrics around “minimum” sizes, there was a split in the constituency as to whether or not Dark Orders were to meet a minimum size requirement at all. Buy Side Traders were split 50% “Yes” / “Yes” with exceptions” and 50% “No” / “No with Exceptions”, while Sell Side Traders were split 53% “Yes” / “Yes” with exceptions” and 42% “No” / “No with Exceptions” (the balance of respondents on the Sell Side answered “I don’t know”).

Conclusion After considering the responses of a sample set of CSTA constituents on the matters surrounding Dark Liquidity in Canada, the following are the areas which can be declared as the opinion of the majority:

1. Visible Orders should have priority of Dark Orders; 2. “Large” Dark Orders should be able to trade without any price improvement to the NBBO; 3. Partially Hidden Orders should not be required to have a minimum trade size; 4. The MOC facility should be exempted from any possible minimum size requirements.

Although there are many questions which do not allow us to state a firm position, we encourage you to read the free‐form responses as a source of additional input. We hope that the enclosed survey helps shed some light on the perspective of Canadian Traders regarding issues pertaining to Dark Liquidity in Canada. If you have any questions regarding our survey, do not hesitate to ask. We would also welcome any feedback on the survey format and/or questions to be able to improve our methodology. We remain at your disposal if you wish to schedule a meeting to discuss any ongoing market structure issues. Respectfully,

Kelly Reynolds G.W. (Sonny) Lennon Doug Clark CSTA Trading Issues Committee CSTA, President CSTA, Chair [email protected] [email protected] [email protected]

(416)‐913‐3903 (705) 924‐1877 (416) 359‐4151 c.c. to: OSC, Ms. Tracey Stern, Assistant Manager, Market Regulation, OSC, 20 Queen Street West, Suite 1903, Toronto, ON M5H 3S8 [email protected] Mr. Howard Wetston, QC, Chair and CEO, OSC, 20 Queen Street West, Suite 1903, Toronto, ON M5H 3S8 [email protected] IIROC, Ms. Maureen Jensen, SVP, Surveillance & Compliance, IIROC, Suite 1600, 121 King Street West, Toronto, Ontario , M5H 3T9 [email protected] Mr. Mike Prior, Vice President, Surveillance, IIROC, Suite 1600, 121 King Street West, Toronto, Ontario , M5H 3T9 [email protected]

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Ms.Susan Wolburgh Jenah, President and CEO, IIROC, Suite 1600, 121 King Street West, Toronto, Ontario , M5H 3T9 Securities Commissions c.c. ‐ Alberta Securities Commission ‐ British Columbia Securities Commission ‐ Manitoba Securities Commission ‐ New Brunswick Securities ‐ Ontario Securities Commission ‐ Securities Commission of Newfoundland and Labrador ‐ Registrar of Securities Department of Justice, Government of the Northwest Territories

‐ Nova Scotia Securities Commission ‐ Registrar of Securities, Legal Registries Division, Department of Justice, Government of Nunavut ‐ Prince Edward Island Securities Office ‐ Saskatchewan Financial Services Commission ‐ Registrar of Securities, Government of Yukon ‐ Autorité des marchés financiers (AMF)

CSTA Trading Issues Survey - Dark Liquidity - December 2010

1. Which CSTA Affiliate are you currently a member of: Please choose the option below that best

describes your area of work:

Buy Side Trader Sell Side Trader Response

Totals

Institutional Equity Traders Association (of Toronto) 70.0% 82.9% 79.5%

(IETA) (28) (92) (120)

Montreal Institutional Equity Traders Association 10.0% 9.0% 9.3%

(MIETA) (4) (10) (14)

Vancouver Security Traders Association (VSTA) 15.0% 4.5% 7.3%

(6) (5) (11)

I am NOT a CSTA member (please specify) 2 replies 4 replies 4.0%

(5.0%) (3.6%) (6)

answered question 40 111 151

skipped question 0

CSTA Trading Issues Survey – Dark Liquidity in Canada December 2011

2. Please choose the option below that best describes your area of work: Please choose the option below that best



Totals

Buy Side Trader 100.0% 0.0% 26.5%

(40) (0) (40)

Sell Side Trader 0.0% 100.0% 73.5%

(0) (111) (111)

Exchange / ATS 0.0% 0.0% 0.0%

(0) (0) (0)

Vendor 0.0% 0.0% 0.0%

(0) (0) (0)

Other (please specify) 0 replies 0 replies 0.0%

(0.0%) (0.0%) (0)


skipped question 0

3. What type of institution do you work for: Please choose the option below that best



Totals

Bank-Owned Dealer 0.0% 41.4% 41.4%

(0) (46) (46)

Non-Bank Owned Dealer 0.0% 55.0% 55.0%

(0) (61) (61)


(0.0%) (3.6%) (4)


skipped question 40

4. Which is your primary area of focus: Please choose the option below that best



Totals

Equities 100.0% 100.0% 100.0%

(40) (111) (151)

Derivative Products (options, futures,..) 0.0% 0.9% 0.7%

(0) (1) (1)

Fixed Income 0.0% 0.0% 0.0%

(0) (0) (0)

Currencies 0.0% 0.0% 0.0%

(0) (0) (0)

Commodities 0.0% 0.0% 0.0%

(0) (0) (0)


(0.0%) (0.0%) (0)


skipped question 0

5. Should Dark Orders be required to provide "meaningful" price improvement over the NBBO (National Best Bid and Offer)?

Please choose the option below that best



Totals

Yes 35.0% 40.5% 39.1%

(14) (45) (59)

Yes (with exceptions) 15.0% 25.2% 22.5%

(6) (28) (34)

No 42.5% 29.7% 33.1%

(17) (33) (50)

No (with exceptions) 5.0% 1.8% 2.6%

(2) (2) (4)

I don't know2.5% 2.7% 2.6%

(1) (3) (4)

Comments and/or exceptions 4 replies 19 replies 23


skipped question 0

6. If "YES" to the previous question, what do you consider to be “meaningful" price improvement”? Please choose the option below that best



Totals

0.0001 Over Best Bid/Under Best Offer 0.0% 0.9% 0.7%

(0) (1) (1)

0.001 Over Best Bid/Under Best Offer 0.0% 8.1% 6.0%

(0) (9) (9)

1/2 Cent Over Best Bid/Under Best Offer 12.5% 21.6% 19.2%

(5) (24) (29)

Mid-Quote 20.0% 11.7% 13.9%

(8) (13) (21)

1 Full Tick Over Best Bid/Under Best Offer, 1/2 Cent 17.5% 24.3% 22.5%

if spread 1 Cent (7) (27) (34)

I answered "NO" to the previous question 47.5% 27.0% 32.5%

(19) (30) (49)

I answered "I don't know" to the previous question2.5% 3.6% 3.3%

(1) (4) (5)


(0.0%) (2.7%) (3)


skipped question 0

7. Should Visible Orders have priority over Dark Orders at the same price? Please choose the option below that best



Totals

Yes, on the SAME marketplace 13.9% 31.2% 26.9%

(5) (34) (39)

Yes, on ALL marketplaces 41.7% 56.9% 53.1%

(15) (62) (77)


(4) (3) (7)

No 27.8% 8.3% 13.1%

(10) (9) (19)


(1) (0) (1)

I don't know2.8% 0.9% 1.4%

(1) (1) (2)



skipped question 6

8. Should two "Large" Dark Orders that match be exempt from any meaningful price improvement rule? (such as Broker Crosses are currently allowed to trade at the NBBO)




Totals

Yes 66.7% 58.7% 60.7%

(24) (64) (88)


(2) (5) (7)

No 19.4% 27.5% 25.5%

(7) (30) (37)


(1) (3) (4)

I don't know5.6% 6.4% 6.2%

(2) (7) (9)

Comments and/or exceptions 1 reply 3 replies 4


skipped question 6

9. If "YES" to the previous question, what do you believe should be considered the size of a “Large” order? (Choose either one share amount, one $ amount or one of each)




Totals

1 000+ shares 2.8% 5.5% 4.8%

(1) (6) (7)

5 000+ shares 8.3% 14.7% 13.1%

(3) (16) (19)

10 000+ shares 11.1% 14.7% 13.8%

(4) (16) (20)

20 000+ shares 16.7% 4.6% 7.6%

(6) (5) (11)

$10 000+ 2.8% 0.9% 1.4%

(1) (1) (2)

$20 000+ 0.0% 0.9% 0.7%

(0) (1) (1)

$50 000+ 2.8% 6.4% 5.5%

(1) (7) (8)

$100 000+ 11.1% 11.0% 11.0%

(4) (12) (16)

$250 000+ 11.1% 7.3% 8.3%

(4) (8) (12)


(9) (31) (40)


(2) (3) (5)


(13.9%) (10.1%) (16)


skipped question 6

10. Should Dark Orders be required to meet a minimum size limit? (Ie. Any order directed to a Dark Pool or any Fully Hidden Order Type offered by an exchange/ATS)




Totals

Yes 44.4% 47.2% 46.5%

(16) (50) (66)


(2) (6) (8)

No 44.4% 40.6% 41.5%

(16) (43) (59)


(2) (2) (4)

I don't know0.0% 4.7% 3.5%

(0) (5) (5)



skipped question 9

11. If "YES" to the previous question, what do you believe should be the minimum size limit? (Choose either one share amount, one $ amount or one of each)




Totals

1 000+ shares 5.6% 12.3% 10.6%

(2) (13) (15)

5 000+ shares 11.1% 13.2% 12.7%

(4) (14) (18)

10 000+ shares 16.7% 11.3% 12.7%

(6) (12) (18)

20 000+ shares 2.8% 3.8% 3.5%

(1) (4) (5)

$10 000+ 2.8% 0.0% 0.7%

(1) (0) (1)

$20 000+ 2.8% 1.9% 2.1%

(1) (2) (3)

$50 000+ 0.0% 3.8% 2.8%

(0) (4) (4)

$100 000+ 2.8% 4.7% 4.2%

(1) (5) (6)

$250 000+ 5.6% 2.8% 3.5%

(2) (3) (5)


(17) (43) (60)


(0) (4) (4)


(8.3%) (3.8%) (7)


skipped question 9

12. Should Partially Hidden Orders be required to meet a minimum size limit? (Ie. Iceberg orders) Please choose the option below that best



Totals

Yes 27.8% 37.5% 35.0%

(10) (39) (49)


(1) (5) (6)

No 66.7% 56.7% 59.3%

(24) (59) (83)


(1) (0) (1)

I don't know0.0% 1.0% 0.7%

(0) (1) (1)



skipped question 11





Totals

1 000+ shares 13.9% 20.2% 18.6%

(5) (21) (26)

5 000+ shares 0.0% 6.7% 5.0%

(0) (7) (7)

10 000+ shares 8.3% 6.7% 7.1%

(3) (7) (10)

20 000+ shares 0.0% 1.0% 0.7%

(0) (1) (1)

$10 000+ 2.8% 0.0% 0.7%

(1) (0) (1)

$20 000+ 0.0% 0.0% 0.0%

(0) (0) (0)

$50 000+ 0.0% 0.0% 0.0%

(0) (0) (0)

$100 000+ 0.0% 2.9% 2.1%

(0) (3) (3)

$250 000+ 2.8% 1.0% 1.4%

(1) (1) (2)


(25) (58) (83)


(0) (1) (1)


(5.6%) (5.8%) (8)


skipped question 11

14. Should the MOC (Market on Close) facility be exempted from any minimum size limits (since the MOC is a Dark Order Facility by definition)?




Totals

Yes 66.7% 66.0% 66.2%

(24) (68) (92)


(0) (2) (2)

No 30.6% 25.2% 26.6%

(11) (26) (37)


(0) (2) (2)

I don't know2.8% 3.9% 3.6%

(1) (4) (5)

What is the MOC? 0.0% 1.0% 0.7%

(0) (1) (1)



skipped question 12

15. The CSA/IIROC has stated the following in their Position Paper 23-405 (pg. 2): “We are of the view that, in order to facilitate the price discovery process, orders entered on a marketplace should generally be transparent to the public and subject to the pre-trade information transparency requirements as detailed in NI 21-101”. Do you agree with this statement?




Totals

Yes 38.9% 47.6% 45.3%

(14) (49) (63)


(4) (26) (30)

No 36.1% 18.4% 23.0%

(13) (19) (32)


(2) (4) (6)

I don't know8.3% 4.9% 5.8%

(3) (5) (8)



skipped question 12

1. Which CSTA Affiliate are you currently a member of: Buy Side Sell Side I am NOT a CSTA member (please specify)

Trader Trader

1 X STA member Dec 15, 2010

2 X US-loc Dec 15, 2010

3 X BIMA member Dec 15, 2010

4 X US BD Dec 30, 2010

5 X US Broker-Dealer Dec 30, 2010

6 X sta Dec 31, 2010

3. What type of institution do you work for?

Buy Side Sell Side Other (please specify)

Trader Trader

1 X bank sub Dec 20, 2010

2 X Global Dealer Dec 20, 2010

3 X International Dec 22, 2010

4 X NON-Canadian Bank Owned Dealer Jan 4, 2011

5. Should Dark Orders be required to provide "meaningful" price improvement over the NBBO (National Best Bid and Offer)? Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X in my opinion price improvment is required to encourage Dec 14, 2010

price discovery in the lit market

2 X there shouldnt be any dark orders, what happens to Dec 14, 2010

transparency? you can not promote transparency on one

hand and hide it with the other hand

3 X unless either side is willing to trade outside the NBBO Dec 14, 2010

4 X Exception would be over size thresholds, building blocks or Dec 14, 2010

residuals.

5 X It's a 2 part problem. Proliferation of HFT's have driven up Dec 15, 2010

the dealers costs. Dark Pools/Orders are a way to combat

this similar to the US model. If there is no remedy for

escalating costs than their needs to be a remedy for the

impact of HFT's.

6 X Minimum size at the NBBO for both sides Dec 15, 2010

7 X Large block trading at the NBBO is acceptable (because it's Dec 18, 2010

an on-exchange version of the upstairs market in many

ways), but at-the-touch dark trading for retail order flow has

the potential to reduce the amount of natural order flow in

the lit markets, which reduces their quality for resting orders.

In the US, lit markets are "toxic" and we need to avoid a

similar outcome for Canada.

8 X whats meaningful Dec 20, 2010

9 X large orders should permitted to trade at NBBO Dec 20, 2010

10 X large orders should be permitted to trade at the NBBO Dec 20, 2010


12 X Large orders should be permitted to trade at the NBBO Dec 20, 2010

13 X large orders should be permitted to trade at NBBO Dec 20, 2010

14 X large orders should be allowed to trade at nbbo Dec 20, 2010

15 X Large trades should be allowed to trade at the touch (at the Dec 22, 2010

NBBO)

16 X I would allow larger orders to be matched at the NBBO Dec 23, 2010

similar to the upstairs market

17 X Meaningful should not denmand full penny price Dec 24, 2010

improvement; the market has changed a tenths/hundreths of

a penny are relevant in many cases.

18 X real dark pool trades of 10k shares and over are ok. Dec 28, 2010

19 X ability to meet and match on the bid/offer should be allowed Dec 29, 2010

...producing annonymity so arguably price improvement

over the trade

20 X "Meaningful" needs to be better defined. I believe Dec 29, 2010

decimalization is meaningful enough.


22 X Exception is if 2 dark orders meet the minimum size Jan 3, 2011

threshold as proposed in the paper.

23 X Upstairs block crosses should not be required to price Jan 4, 2011

improve vs. the NBBO.

6. If "YES" to the previous question, what do you consider to be “meaningful" price improvement”?


Trader Trader

1 X i don't think the regulators should set the price improvement Dec 14, 2010

and let the markets and investors chose.... if u want to give

less than midquote you must realize that you are than

provided a larger foot print because tape readers now know

which side of the trade was the liquidity provider

2 X 20% of the spread Dec 21, 2010

3 X n/a Jan 4, 2011

7. Should Visible Orders have priority over Dark Orders at the same price? Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X On the SAME marketplace and below size threshold. Dec 14, 2010

2 X By being "dark", one has made a decision to hide their order Dec 15, 2010

and someone should be "rewarded" by being visible...this

would be via priority

3 X See prev comments Dec 15, 2010

4 X Visible of small size should not interact with dark resting Dec 15, 2010

order in small size unless flagged as such by trader entering

the dark order.

5 X size is an exception 10k shs Dec 28, 2010

6 X Exception is for 2 Dark orders meeting the minimum size Jan 3, 2011

threshold as proposed in the paper

7 X at the same market complex - alpha and interspread - or tsx Jan 4, 2011

and select should be considered one market or this rule will

be useless

8. Should two "Large" Dark Orders that match be exempt from any meaningful price improvement rule? (such as Broker Crosses are currently allowed to trade at the NBBO) Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X upstairs crosses should be able to cross with out price Dec 14, 2010

improvement

2 X Crossing at the mid-quote of NBBO in a dark venue should Dec 15, 2010

be enough to satisfy price improvement requirements.

3 X "large" needs to be, in fact, large, and perhaps on a sliding Dec 18, 2010

scale based on stock price point and liquidity.

4 X I don't think there should be a requirement for "meaningful" Dec 22, 2010

price improvement for a dark order

9. If "YES" to the previous question, what do you believe should be considered the size of a “Large” order? (Choose either one share amount, one $ amount or one of each) Buy Side Sell Side Other (please specify)

Trader Trader

1 X Some multiple (say 50) of board lot. Dec 14, 2010

2 X no size requirement needed. Dec 15, 2010

3 X Size should be specific to capitalization of the security and Dec 15, 2010

defined as such. 5k in a micro stock could be "large", where

5k in a hi-volume stock is needless noise. Thresholds

should be based upon that criteria.

4 X Depends on the stock, whether liquid or illiquid, one size Dec 17, 2010

does not fit all

5 X It depends on size. 5000 BBD.B is not large, but 5000 FFH Dec 18, 2010

is. The UMIR 50 standard trading unit notion is definitely not

large enough IMO.

6 X this is consistent with order exposure rules in UMIR Dec 20, 2010

7 X this is consistent with order exposure rules in UMIR Dec 20, 2010

8 X this is consistent with the order exposure rules in UMIR Dec 20, 2010

9 X $3,000,000 Dec 20, 2010

10 X ie - matches UMIR's order exposure rule Dec 22, 2010

11 X Liquidity based. Meaningful liquidity improvement - I leave Dec 22, 2010

that undefined for now...

12 X Depending on the value of the trade. 10,000 shares for > $5 Dec 29, 2010

stock 25,000 >1 <5 50,000 <1

13 X a function of ADV. 5% and above Dec 31, 2010

14 X I think all orders shoudl be excluded from price improvement Jan 4, 2011

if marketable

15 X no size minimum for any fully hidden orders.... Jan 4, 2011

16 X All dark orders, not just large dark orders should be allowed Jan 4, 2011

to cross w/o price improvement.

10. Should Dark Orders be required to meet a minimum size limit? (Ie. Any order directed to a Dark Pool or any Fully Hidden Order Type offered by an exchange/ATS) Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X Depends on price of stock and ADV. Dec 14, 2010





3 X see prev comments Dec 15, 2010

4 X It all depends on how dark resting orders interact with active Dec 15, 2010

lit order types.

5 X This is arbitrary, unnecessary, redundant and draconian. Dec 17, 2010

6 X Complex topic, because entering a "big enough" order and Dec 18, 2010

then reducing its quantity could be a loophole. The rules

need to be structured such that dark liquidity favours natural

participants looking to invest.

7 X i would like to see a user defined minimum size parameter Dec 20, 2010

on dark orders so that we can elect a minimum size if

required

8 X small dark orders should be allowed. Dec 21, 2010

9 X boardlots or 1000 shares Dec 29, 2010

10 X You can not categorize dark pool orders and Hidden limit Dec 30, 2010

orders as the same thing.

11 X handcuffing me from acheiving best execution makes no Jan 4, 2011

sense...let the traders decide what is best for their clients

order...if too many orders go dark figure out what the lit

markets are doing to push orders away.

12 X Dark orders should not be allowed... Jan 4, 2011

13 X USers should be able to specify minimum quantities that Jan 4, 2011

they want to interact with.

14 X unless they want to match at NBBO Jan 4, 2011



Trader Trader

1 X Some multiple (say 50) of board lot. Dec 14, 2010

2 X 1000 share max. Less for low ADV stocks (such as 500 Dec 14, 2010

shares)





4 X Should be a sliding scale, connected with minimum price Dec 18, 2010

improvement scale. The key is that it should be risky to put

in orders simply for the purpose of sniffing out liqudity, and

with no investment objective at all.

5 X Size of current bid or offer????? Dec 22, 2010

6 X You can not categorize dark pool orders and Hidden limit Dec 30, 2010

orders as the same thing.

7 X n/a Jan 4, 2011

12. Should Partially Hidden Orders be required to meet a minimum size limit? (Ie. Iceberg orders)

Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X board lot Dec 20, 2010

2 X At least one board lot. Jan 4, 2011

13. If "YES" to the previous question, what do you believe should be the minimum size limit? (Choose either one share amount, one $ amount or one of each) Buy Side Sell Side Other (please specify)

Trader Trader

1 X 500+ shares Dec 14, 2010

2 X you're already at 500 Dec 15, 2010

3 X Liquididty based. Dec 22, 2010

4 X Dark orders should be exempt from this requirement. Dec 23, 2010

Minimum size requirements and pre-trade transparency will

lead to many orders not being exposed to the market at all.

More order flow will move to the upstairs market leading to

poorer price discovery. Dark orders and markets provide for

a more stable market and deeper available liquidity.

5 X Same as the minium iceberg requirements imposed by the Dec 31, 2010

TSX.

6 X At least one board lot. Jan 4, 2011

7 X 500 Jan 4, 2011

8 X n/a Jan 4, 2011

14. Should the MOC (Market on Close) facility be exempted from any minimum size limits (since the MOC is a Dark Order Facility by definition)? Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X odd lots should be allowed Dec 14, 2010

2 X Given that in a dark pool, the price would be automatically Dec 15, 2010

set to mid-quote of NBBO and the MOC facility pricing is

done in a more visible manner, there should not be

minimums as supply and demand will dictate price range.

3 X MOC is not a dark pool in the sense being discussed in the Dec 18, 2010

CSA paper.

4 X No size limits should apply to any dark pool Dec 22, 2010

5 X MOC orders are currently board lots... it SHOULD allow odd Dec 31, 2010

lots.

6 X but there should be no minimum size in the first place. Jan 4, 2011

15. The CSA/IIROC has stated the following in their Position Paper 23-405 (pg. 2): “We are of the view that, in order to facilitate the price discovery process, orders entered on a marketplace should generally be transparent to the public and subject to the pre-trade information transparency requirements as detailed in NI 21-101”. Do you agree with this statement? Buy Side Sell Side Comments and/or exceptions

Trader Trader

1 X as long as you still agree that dark marketplaces should Dec 14, 2010

exist

2 X please translate to english. thanks Dec 14, 2010

3 X Dark liquidity should remains "dark"... Dec 14, 2010

4 X Generally speaking, but Dark Pools serve a purpose to other Dec 14, 2010

objectives such as price improvement and limited market

impact on large orders. Statement is far too general.

5 X i think we really need to move towards the US markets in Dec 14, 2010

how you have the ability to sweep displayed orders and then

cross at a specific price. That way, it forces more displayed

bids/offers thereby giving us a truer market price.

6 X IF REGULATORS WANT TO FORCE INVESTORS INTO Dec 14, 2010

VISIBLE MARKETS THEN THEY SHOULD PROVIDE

VISIBLE MARKETS THAT ARE FREE FROM HFT'S, NON

INVESTORS AND KNOWN SPECULATORS WHO DRIVE

UP THE COSTS OF EXECUTION FOR INVESTORS.

7 X If dark pools are authorized and used, transparency is not Dec 15, 2010

present. Dark pools add value to the market in sourcing

liquidity, especiallyin the institutional space. What needs to

be discussed is not broad-stroking "dark orders" as those

entered in both a firm's internalization engine and a true

dark pool whose business model is to trade large blocks.

The 2 models should be looked at/reviewed separately in

discussions and dealt with separately in any forthcoming

regulation.

8 X Dark order types Dec 15, 2010

9 X The transparency requirement is inversely proportional to Dec 18, 2010

size. I think institutional investors concerned about

information leakage need to be protected, and given useful

tools to that end. But in general, if we go down the path of

too much dark pool activity for natural orders I believe our lit

markets will become toxic (a la US) and our quality of price

discovery will be compromised.





poorer price discovered, not better. Functioning dark orders

and markets provide for a more stable market and deeper

available liquidity.








15. The CSA/IIROC has stated the following in their Position Paper 23-405 (pg. 2): “We are of the view that, in order to facilitate the price discovery process, orders entered on a marketplace should generally be transparent to the public and subject to the pre-trade information transparency requirements as detailed in NI 21-101”. Do you agree with this statement? (CONTINUED) Buy Side Sell Side

Comments and/or exceptions Trader Trader








13 X daek orders should be exempt from this requirement. min Dec 20, 2010

size requirements and pre-trade transparancy will lead to

many orders not being exposed to the market at all. More

order flow could move upstairs leading to worse pice

discovery, not better. Functioning dark orders and markets

provide for a more stable market and deeper available

liquidity.















16 X Markets depend on being able to transact large amounts Dec 21, 2010

without displaying your size. Either we have a large

upstairs market or our marketplaces have to allow for hidden

order types. I mostly prefer the latter since an upstairs

market can be inefficient and also subject to information

leakage.

17 X Dark order-types should be exempt from this requirement. Dec 22, 2010


lead to many orders not being sent to ANY market. A great

deal of flow will remain "upstairs". Dark orders result in

greater accessible liquidity to all.

18 X "Transparency" has become an assumed virtue. Fair and Dec 22, 2010

orderly markets are more important than "transparency"

itself - transparency is a means not an end, and is currenlty

used as justification for those participants who are more

inerensted in latency arb/order anticipation than in price

discovery or capital formation.





poorer price discovery. Dark orders and markets provide for

a more stable market and deeper available liquidity.

15. The CSA/IIROC has stated the following in their Position Paper 23-405 (pg. 2): “We are of the view that, in order to facilitate the price discovery process, orders entered on a marketplace should generally be transparent to the public and subject to the pre-trade information transparency requirements as detailed in NI 21-101”. Do you agree with this statement? (CONTINUED) Buy Side Sell Side

Comments and/or exceptions

Trader Trader








21 X With the financial world seeking increased transparency, I Dec 31, 2010

believe that we should not let our markets have dark pools.

Its unfair to the retail and institutional investor. Would you

allow a broker to put up a dark cross?

22 X There is zero evidence that lit markets perform better than Jan 4, 2011

dark ones...so why are the regulators forcing us to go in a

particular direction....orders will go where they are treated

best.

23 X Customers should have a choice with respect to the orders Jan 4, 2011

that they use based on their trading strategies. Some

strategies who require use of dark orders to minimize

market impact.

CANADIAN SECURITY TRADERS ASSOCIATION, INC · The Canadian Security Traders Association, Inc. ......

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